2022 NEW POINTERS

TAX REMEDIES
Department Chairs

Atty. Mark Anthony P. Tamayo

Chairperson, Taxation Law Department

Dean Salvador Moya

Remedial Law Department

Prof. Jose R. Ortiz, Jr.

Civil Law Department

Chief City Prosecutor Aldrin P. Evangelista

Criminal Law Department

Dean Aristeo R. Cruz

Commercial Law Department

Atty. Voltaire T. Duano

Labor Law Department

State Solicitor Ruben S. Ayson, Jr.

Political Law Department

Atty. Alma Lanzo

Legal Ethics Department
 Bar Operations Committee
Political and International Law
Atty. Evangeline Omadto (Supervising Lawyer)
Del Agua, Athena - Team Leader; Balacanao, Hannah – Asst.
Members: Acosta, Pamela; Balan, Ailene; De La Rosa, Ma. Kathyrine Rose; Felimon, Jean Lianne; Galdo, Arwin; Garil,
Mary Ann; Grospe, Kathryne Joy; Mirador, Jerome

Labor Law
Atty. Patrick Cortes (Supervising Lawyer)
Singson, Nikki – Team Leader; Santiago, Jullia Nicole – Asst.
Members: Andres, Alyssa Faith; Dimaculangan, Leila; Diomino, Katleen; Marlin,Georgelyn; Orillosa, Mariel; Santoyo, Iralyn;
San Pedro, Carmela; De Chavez, Alvin

Criminal Law
Atty. Ellizar Castelltort (Supervising Lawyer)
Canoso, Marvic – Team Leader
Members: Abad, Samuel Edrian; Baldesco, Maria Monica; Cabading, Hyacinth Anne; Garlitos, Victor; Gemoto, Joyce; Luisa,
Andrea Mariz B. Padilla, Ruby; Salazar, Franchesca

Commercial Law
Atty. Mark Angelo Reyes (Supervising Lawyer)
Tagumpay, Diwa – Team Leader; Alejos, Jenaline – Asst.
Members: Alipio, Mark; De Jesus, Ryan Joeferson; Medico, Irish

Civil Law
Atty. Randel Felismino (Supervising Lawyer)
Olalo, Lycel , Team Leader; Cabang, John Benedick P. - Asst.
Members: Agustin, Arvy; Bactin, April Joy; Dazo, Al Adrian; Doctor, Lorenz Benedict; Guzman, Mariah Alliana; Vicedo, Lloyd
David

Remedial Law
Atty. Katherine Macorol (Supervising Lawyer)
Jungco, Jericho – Team Leader; Pado, Maria Potenciana – Asst.
Members: Ampa, Monisah; Belleza, Jan Pauline; Datlan, Johayra; Dela Cruz, Arthur Michael; Rodriguez, Jayra; Salvacion,
Odette

Taxation Law
Atty. Ana Reyes (Supervising Lawyer)
Fuentes, Angelo – Team Leader; Sembrana, Jonel – Asst.
Members: Balero, Ma Lourdes; Cortes, Dann Philip; Domingo, Kim; Tagulob, Gizella Kym

Legal Ethics
Atty. Leihriza Urban (Supervising Lawyer)
Ronquillo, Ian – Team Leader; Vertucio, Stella Anne Marie – Asst.
Members: Barrameda, Victorio III; Basal, Bernadeth; Espineli, Caryl; Ferrer, Karl Mark
Executive Committee
Atty. Nery B. Aspili
Chairperson

Mark JR. Alipio

Assistant

Assistant Layout Artist

Adviser
DEAN RODERICK MANZANO
Administrative Officers

Mr. Ravi dG. Ysmael

Legal Aid Clinic’s Staff

PROBLEM NO. 1: The BIR Commissioner issued a Letter of Authority to
commence an investigation on Mr. Gaw’s books of accounts. The following
day, the BIR filed with the DOJ a joint complaint affidavit for tax evasion
against Mr. Gaw for misdeclaring his income, misclassifying the properties,
and using multiple Tax Identification Numbers to avoid being assessed the
correct amount of taxes.

The DOJ then filed criminal information for tax evasion against Mr. Gaw in
the CTA. At that time, the BIR has not yet issued a final decision on the
deficiency tax assessment against Mr. Gaw.

Halfway through the trial, the BIR issued a final decision on Disputed
Assessment (FDDA) against Mr. Gaw, assessing him of deficiency income tax
and VAT arising from the sale of his properties which were subjected to 6%
CGT, instead of the regular income and 12% VAT for taxable years 2007 and
2008.

With respect to the 2007 deficiency assessment, Mr. Gaw filed a petition for
review with the CTA.

With respect to the 2008 deficiency assessment, the same involves the same
tax liabilities being recovered in the pending criminal cases. Thus, Mr. Gaw
filed before the CTA a motion to clarify whether he has to file a separate
petition to question the deficiency assessment for 2008. The CTA ruled that
the recovery of the civil liabilities for taxable year 2008 was deemed
instituted with the criminal case.

As a precaution, Mr. Gaw filed a Petition for Review Ad Cautelam (with

Motion for Consolidation). The clerk of court of the CTA assessed Mr. Gaw
with “zero” filing fees.

Mr. Gaw was acquitted in the criminal case and the CTA directed the
litigation of the civil aspect.

1. Is the civil action filed by Mr. Gaw to question the FDDA deemed
instituted in the criminal case for tax evasion?
2. Is the Petition for Review Ad Cautelam filed by Mr. Gaw deemed
instituted in the civil action for recovery of taxes?
3. Is the CTA correct in dismissing the petition for the failure of Mr.
Gaw to pay the docket fees?

SUGGESTED ANSWER:
1. Under the Revised Rules of Court of the CTA (RRCTA), the civil
action filed by Mr. Gaw to question the FDDA is not deemed
instituted with the criminal case for tax evasion. Civil liability
arising from a different source of obligation, such as when the
obligation is created by law, such civil liability is not deemed
instituted with the criminal case.
6
 Taxpayer’s obligation to pay tax is an obligation that is created by
law and does not arise from the offense of tax evasion. As such,
the same is not deemed instituted in the criminal case.

Civil liability to pay taxes arises from the fact that one has engaged
himself in business, and not because of any criminal act
committed by him. The acquittal in the criminal case cannot
operate to discharge the taxpayer from the duty of paying the taxes
which the law requires to be paid, since the duty is imposed by
statute prior to and independently of any attempts by the taxpayer
to evade payment

2. The tax evasion case filed by the government against the erring
taxpayer has, for its purpose, the imposition of criminal liability on
the latter. While the petition for review filed by Mr. Gaw was aimed
to question the FDDA and to prevent it from becoming final. The
stark difference between them is glaringly apparent. As such, the
Petition for Review Ad Cautelam is not deemed instituted with the
criminal case for tax evasion.

What is deemed instituted with the criminal action is only the

government’s recovery of the taxes and penalties relative to the
criminal case. The remedy of the taxpayer to appeal the disputed
assessment is not deemed instituted with the criminal case. To
rule otherwise would be to render nugatory the procedure in
assailing the tax deficiency assessment.

3. Basic is the rule that the payment of docket and other legal fees is
both mandatory and jurisdictional. However, while the court
acquires jurisdiction over any case only upon payment of the
prescribed docket fees, its nonpayment at filing does not
automatically cause its dismissal so long as the docket fees are
paid within a reasonable period; and that the party had no
intention to defraud the government. (See GAW v. CIR, G.R. No.
222837, July 23, 2018)

PROBLEM NO. 2: Under Section 112 (A) and (C) of the NIRC, any VAT-
registered person whose sales are zero-rated or effectively zero-rated, may
file a claim for tax credit or refund within 2 years after the close of the
taxable quarter where the sales were made, and the Commissioner shall
grant the refund or issue a tax credit certificate within 120 days from the
“date of submission of complete documents.”

1. How do we determine if the submitted documents are already

complete for purposes of reckoning the 120 days?
2. Will the submission of complete documents be still an issue with the
enactment of the TRAIN Law?
7
SUGGESTED ANSWER:

a. Under Section 112 of the Tax Code, a VAT registered may file an
application for a refund or tax credit on unutilized input VAT arising from
zero-rated sales within 2 years from the close of the taxable quarter where
the sales were made. Prior to the TRAIN Law, the period for the BIR
Commissioner to act on the claim is 120 days from the submission of
complete documents supporting the claim. This 120-day period is
jurisdiction. Ultimately, it is the taxpayer that should determine whether
the documentation is already complete as he is the one most interested in
expediting the processing of the claim for refund or tax credit. However,
there had been instances where the BIR, after the taxpayer claimant has
submitted pertinent documents, requested certain additional documents
to be submitted to support the claim for refund/tax credit. In such
instances, the reckoning of the period of the 120-day period shall be from
the submission of the documents as required by the BIR.

b. Under the TRAIN Law, the salient amendment with respect to applications
for a refund or tax credit on unutilized input VAT arising from zero-rated
sales is that the period of the BIR Commissioner to act upon the
application for refund/tax credit is within 90 days from the submission of
the documents. The application for refund/tax credit though must
likewise be filed within 2 years from the close of the taxable quarter where
the sales were made.

Under the TRAIN Law and under pertinent implementation regulations to

Section 112 of the Tax Code, as amended, the taxpayer in the filing of the
application for VAT refund/tax credit is mandated to likewise submit all
required relevant documents in support of such application. Thus, the
reckoning period for the BIR Commissioner to act on the claim shall be on
the date the application for VAT refund/tax credit is filed with the BIR.

PROBLEM NO. 3: Can the CTA exercise exclusive original jurisdiction over
all criminal offenses arising from violations of the NIRC, the CMTA, and
other laws administered by the BIR or the Bureau of Customs?

SUGGESTED ANSWER:

Yes. Under RA No. 9282, amending RA 1125, the CTA has exclusive original
jurisdiction over all offenses arising from violations of the NIRC, the Tariff
and Customs Code and other laws administered by the BIR or the Bureau of
Customs, if the amount involved is Php1,000,000 or more.

If the amount involved is less than Php1,000,000, the RTC has exclusive
original jurisdiction of the case and CTA’s jurisdiction, upon appeal of the
case, is appellate.

PROBLEM NO. 4: On December 21, 2012, Republic Act No. 10351 took
8
effect upon its publication in a newspaper of general circulation. The law
amended among others, Section 143 of the NIRC of 1997 which imposes
excise tax on fermented liquors.

On December 27, 2012, the BIR issued Revenue Memorandum Circular

(RMC) No. 90-2012 which provides for the revised tax rates, effective
January 1, 2013, of alcohol and tobacco products under RA No. 10351.
Based on the said RMC, the applicable tax rate for Boozy Light, in bottle or
in can, is P20.57, instead of P20.00 as provided in Section 143 of the NIRC
of 1997, as amended.

Thereafter, or during the period from January 1, 2013 to December 31,

2013, the BIR allegedly required, and Boozy Light Brewery was constrained
to pay excise taxes on its removal of Boozy Light at the tax rate of P20.57
per liter for Boozy Light in bottle and in can for Boozy Light in kegs, when it
should have paid only P20.00 and P15.00 per liter, respectively, under the
express provisions of the second and third paragraphs of Section 143 of
NIRC of 1997, as amended. Thus, it erroneously or excessively paid the
amount of P0.57 per liter for Boozy Light in bottle and in can and P5.57 per
liter for Boozy Light in kegs, or in the sum of P83,019,296.21.

On December 9, 2014, petitioner file with the BIR a Claim for Refund of its
erroneously and excessively paid excise taxes on Boozy Light for the period
from January 1, 2013 to December 31, 2013.

Assume that the BIR did not act on the administrative claim for refund and
Boozy Light timely files a petition for review before the CTA assailing the
constitutionality of Revenue Memorandum Circular (RMC) No. 90-2012.
Does the CTA have the jurisdiction to pass upon the constitutionality or
validity of a tax law or regulation when raised by the taxpayer as a defense
in disputing or contesting an assessment or claiming a refund?

SUGGESTED ANSWER:

Yes. The CTA has authority to pass upon the constitutionality or validity of
tax laws, regulations, or issuances. The CTA can resolve the validity of a tax
law directly, or when raised as a defense. As long as the constitutionality or
validity of the tax law, rules, regulations, or issuances is the lis mota of the
case, the CTA has the jurisdiction to pass upon the issue. The jurisdiction is
conferred upon it by RA 9282. Within the judicial system, the CTA is tasks
to resolve all tax problems.

Under Republic Act No. 9282, the CTA has exclusive appellate jurisdiction
over decisions of the Commissioner of the BIR on disputed assessments,
refunds or internal revenue taxes, fees or other charges, as well as on “other
matters” arising from the NIRC or other tax laws administered by the BIR.

In the case of Banco De Oro vs Republic G.R. No. 198756, the Supreme Court
stated that the CTA has the jurisdiction to pass upon the constitutionality of
9
tax laws as well as the validity of tax rules, regulations or issuance of the
BIR. In a catena of cases, the courts have ruled that the authority of the
CTA to pass upon the constitutionality or validity of tax laws, rules,
regulations, or issuances, is necessary in order for the CTA to be able to
perform its tasks effectively. Thus, it has the inherent, implied and
incidental powers to pass upon these issues.

PROBLEM NO. 5: On 28 March 2015, the Bureau of Internal Revenue (BIR)

issued an electronic Letter of Authority to Goodwork, Inc., a domestic
corporation, for the examination of its books of accounts and other
accounting records for the taxable year 2014. A notice of informal
conference was held on 05 May 2015, to discuss the discrepancies observed
by the revenue officers and Goodwork, Inc. was able to explain the noted
discrepancies and submitted the required documents to prove the same.

On 27 March 2016, the BIR issued a Final Notice of Assessment against

WPI, informing the latter of its alleged deficiency corporate income tax for
the year 2014 based on the discrepancy between the tax withheld and the
amount actually remitted by Goodwork, Inc. and the excise tax due on
excisable articles has not been paid. On 20 April 20, 2016, Goodwork, Inc.
filed a letter protest before the BIR contesting said assessment and
demanding that the same be canceled or set aside for failure to issue a
Preliminary Assessment Notice which constitutes a denial of due process. Is
Goodwork, Inc.’s contention tenable?

SUGGESTED ANSWER:

NO, the contention of Goodwork, Inc. is incorrect. (1) discrepancy between

the tax withheld and the amount actually remitted by Goodwork, Inc and (2)
the excise tax due on excisable articles has not been paid are the exceptions
to the rule on the issuance of PRELIMINARY ASSESSMENT NOTICE. (Sec.
228 of NIRC, BIR RR No. 12-99)

PROBLEM NO. 6: Globesmart Services, Inc. received a Final Assessment

Notice with a Formal Letter of Demand from the BIR for deficiency income
tax, value-added tax, and withholding tax for the taxable year 2016
amounting to P48 million. Globesmart Services, Inc. filed a protest against
the assessment, but the Commissioner of Internal Revenue denied the
protest. Hence, Globesmart Services, Inc. filed a petition for review in the
CTA with an urgent motion to suspend the collection of tax.

After hearing, the CTA Division issued a resolution granting the motion to
suspend but required Globesmart Services, Inc. to post a surety bond
equivalent to the deficiency assessment within 15 days from notice of the
resolution. Globesmart Services, Inc. moved for the partial reconsideration
of the resolution and for the reduction of the bond to an amount it could
obtain. The CTA Division issued another resolution reducing the amount of
10
 the surety bond to Php24 million. The latter amount was still more than
the net worth of Globesmart Services, Inc. as reported in its audited
financial statements.

(a) May the collection of taxes be suspended? Explain your answer.

(b) Is the CTA Division justified in requiring Globesmart Services, Inc. to

post a surety bond as a condition for the suspension of the deficiency tax
collection? Explain your answer.

SUGGESTED ANSWER:

(a) Yes. As provided by RA No. 1125, as amended by RA No. 9282, that when
in the opinion of the Court the collection by the aforementioned government
agencies may jeopardize the interest of the Government and/or the
taxpayer, the Court at any stage of the proceeding may suspend the
collection and require the taxpayer either to deposit the amount claimed or
to file a surety bond for not more than double the amount with the Court.

(b). No. The Supreme Court in the Tridharma Case cited the case of Pacquiao
v. Court of Tax Appeals (G.R. No. 213394, April 6, 2016) where it ruled that
the CTA should first conduct a preliminary hearing for the proper
determination of the necessity of a surety bond or the reduction thereof. In
the conduct of its preliminary hearing, the CTA must balance the scale
between the inherent power of the State to tax and its right to prosecute
perceived transgressors of the law, on one side, and the constitutional rights
of petitioners to due process of law and the equal protection of the laws, on
the other. In this case, the CTA failed to consider that the amount of the
surety bond that it is asking Globesmart Services, Inc. to pay is more than
its net worth. It is, thus, necessary for the CTA to first conduct a preliminary
hearing to allow the taxpayer to prove its inability to come up with such an
amount.

PROBLEM NO. 7: Finding discrepancies between Yureka Corporation’s

income Tax return and VAT Returns for 2018, the BIR Commissioner (CIR)
issued a Letter Notice (LN) to Yureka Corporation In lieu of a Letter of
Authority (LOA). Subsequently, the CIR issued a Preliminary Assessment
Notice (PAN) and Formal Assessment Notice (FAN) against Yureka
Corporation for deficiency VAT.
After denial of its protest by the CIR, Yureka Corporation filed a Petition for
Review before the Court of Tax Appeals (CTA) arguing, among others, that
the assessment is patently void for failure to observe the required procedure.
On the other hand, the CIR argued that the determination of deficiency VAT
is not limited based on the issuance of a Letter of Authority (LOA) alone as
the CIR is granted vast powers to perform examination and assessment
functions. Furthermore, the assessment is valid having been issued within
the 3-year prescriptive period to assess. Decide.

11
SUGGESTED ANSWER:

The absence of an LOA violated Yureka’s right to due process. The following
differences between an LOA and LN are crucial:
a. LOA addressed to a revenue officer is specifically required under the
NIRC before an examination of a taxpayer may be had while an LN is
not found in the NIRC and is only for the purpose of notifying the
taxpayer that a discrepancy is found based on the BIR's RELIEF
System.
b. LOA is valid only for 30 days from the date of issue while an LN has
no such limitation.
c. LOA gives the revenue officer a definite period to conduct his
examination of the taxpayer whereas an LN does not contain such a
limitation.

Simply put, an LN is entirely different and serves a different purpose than

an LOA.
In issuing an LN, the BIR, in effect, is performing a no-contact audit. Here,
the BIR performs a computerized matching of data from the taxpayer’s
submitted tax returns and information. In case the comparison reveals some
discrepancies, the taxpayer will be informed by the BIR through a Letter
Notice.
An LOA, on the other hand, is the authority given to the appropriate revenue
officer assigned to perform assessment functions. The LOA empowers or
enables the revenue officer to examine the books of account and other
accounting records of a taxpayer to collect the correct amount of tax.
Due process demands that after an LN has served its purpose, the revenue
officer should have properly secured an LOA before proceeding with the
further examination and assessment of the petitioner.
A Final Assessment Notice issued based on an LN is void. (Medicard
Philippines, Inc. vs. CIR, Supreme Court, G.R. No. 222743 April 5,
2017)

PROBLEM NO. 8: Pursuant to a Letter of Authority issued by the BIR

Commissioner, the books and financial records of Tadeco Co. for the taxable
year 2017 were examined by the BIR examiners. During the audit
investigation, the BIR examiners proposed to disallow certain expenses
claimed by Tadeco Co. for being unsupported. Since Tadeco Co. was unable
to refute the findings, the BIR then issued a Preliminary Assessment Notice
(PAN). Unable still to provide documents or position paper within the
prescribed period, the BIR then issued on March 15, 2021, a Formal Letter
of Demand (FLD) together with the Formal Assessment Notice (FAN) which
states “Please note, however, that the interest and the total amount due will
have to be adjusted if paid prior or beyond April 14, 2021”

Said FAN was protested by Tadeco Co. for issuing an invalid demand letter
but was denied by the BIR Commissioner. Hence Tadeco Co. appealed the
case to the Court of Tax appeals arguing that the disputed final assessment
notice is void. Decide.
12
SUGGESTED ANSWER:

The disputed Final Assessment Notice is not a valid assessment.

An assessment, in the context of the National Internal Revenue Code, is a

"written notice and demand made by the BIR on the taxpayer for the
settlement of a due tax liability that is definitely set and fixed."

In the case at bar, it lacks a definite amount of tax liability for which the
taxpayer is accountable. It does not purport to be a demand for payment of
tax due, which a final assessment notice should supposedly be.

Although the disputed notice provides for the computations of Tadeco’s tax
liability, the amount remains indefinite. It only provides that the tax due is
still subject to modification, depending on the date of payment.
(Commissioner of Internal Revenue vs. Fitness By Design, Inc. G.R. No.
215957, November 09, 2016)

PROBLEM NO. 9: The BIR examined the books of accounts of XYC Co.
pursuant to a Letter of Authority issued for the period “from taxable years
2018 and “Unverified Prior Years”.

After examination, the CIR issued 8 assessment notices for deficiency

income tax for taxable years 2010 to 2018.

Upon receipt of the denial of their protest, XYZ filed a petition for review
with the CTA, questioning the validity of the Letter of Authority which gave
rise to the issuance of the assessments for the period 2010 to 2018. Decide.

SUGGESTED ANSWER:

The taxable year 2018 is valid because the taxable period is specified in the
LOA. However, assessments covering taxable years 2010 to 2017 are void for
having been unspecified on separated LOAs.

A Letter of Authority [LOA] should cover a taxable period not exceeding one
taxable year. The practice of issuing LOAs covering the audit of unverified
prior years is prohibited. If the audit of a taxpayer shall include more than
one taxable period, the BIR must specify each taxable year or taxable period
on separate LOAs.

The requirement to specify the taxable period covered by the LOA is simply
to inform the taxpayer of the extent of the audit and the scope of the
revenue officer's authority. Without this rule, a revenue officer can unduly
burden the taxpayer by demanding random accounting records from
random unverified years, which may include documents from as far back as
ten years in cases of fraud audit.

Thus, if an LOA is issued covering a “specific taxable year and "unverified

13
prior years", the LOA will not be rendered void in its entirety but will be
valid as to the declared taxable year.

(William R. Villarica vs. CIR, CTA Case No. 9343 promulgated on

October 21, 2021; CIR v. De La Salle University, Inc, G.R. Nos. 196596,
198841 and 198941, 9 November 2016; CIR v. Sony, Phils., Inc, 649
Phil. 519 (2010)

PROBLEM NO. 10: The BIR assessed YPC Corporation (YPC) for deficiency
income tax, withholding tax, and fringe benefits tax (FBT), for the taxable
year 2019. The Preliminary Assessment Notice (PAN) as well as the Formal
Demand Letter (FLD) and Formal Assessment Notice (FAN) were all was
issued last March 15, 2021. YPC filed its protest but was eventually denied
by the BIR.

YPC then filed a Petition for Review with the CTA, alleging that there was a
violation of procedural due process as the BIR did not accord YPC to dispute
the PAN. On the other hand, the BIR argues that there was no violation of
due process considering that YPC filed its protest against the FLD and FAN.
Decide.

SUGGESTED ANSWER:

The PAN is a part of due process. It informs the taxpayer of the initial
findings of the BIR.

It contains the proposed assessment and the facts, law, rules, and
regulations or jurisprudence on which the proposed assessment is based.

YPC's right to due process was violated because it was deprived of the
opportunity to contest the PAN within the 15-day period allowed under
the rules.

The taxpayer has the right to contest the PAN within 15 days from its receipt
(CIR vs. Yumex Philippines Corp., CTA (EB) Case No. 1139, August 11, 2015,
affirmed January 19, 20160). The BIR cannot validly issue a PAN and FAN
on the same day. FLD/FAN is void if they are issued before the taxpayer files
a Protest against the PAN (Roca Security and Investigation Agency, Inc. vs.
CIR, C.T.A. EB Case No. 1523. August 15, 2018).

The failure to allow YPC to respond to the PAN makes the assessment void.

PROBLEM NO. 11: The Local Government of Manila assessed JRV Corp. for
local business taxes and regulatory fees in the total amount of
Php1,234,567.89. JRV Corp. filed its protest on the assessment through a
letter dated 10 January 2021, arguing that the tax ordinances, where the
local business taxes and regulatory fees are based, have been declared null
and void. It also argued that the collection of local business tax under the
revenue code of Manila constitutes double taxation.
14
JRV Corp. also tendered payment of only Php567,891.12 which it states
that it is the correct computation of their local business tax for the first
quarter of 2021. The City Treasurer of Manila refused to accept the payment
and sent him a letter on 14 February 2021, denying the protest and
demanded and adjusted assessment of Php2,345,678.90. Since the
assessment is way too high, JRV Corp. directly filed appealed the case to the
RTC of Manila on 16 March 2021 and prayed for the cancellation of the
assessment issued by the LGU of Manila. The City of Manila moved for the
dismissal of the case for failure of JRV Corp. to pay first under protest
before filing an appeal and the court has no jurisdiction to entertain the
appeal. Decide.

SUGGESTED ANSWER:

The contention of QC is valid insofar as the RTC has no jurisdiction since it

was filed beyond the 30-day period. However, the filing under protest is not
correct.

Payment under protest is not required in protesting local taxes but the
appeal to the RTC has already prescribed. It is filed beyond the 30-day
period from receipt of denial to appeal to the RTC.

(City of Manila v. Cosmos, G.R No. 196681, 27 June 2018)

PROBLEM NO. 12: In nullifying the assessment against XYZ Corporation,

the CTA ruled that the assessment against XYZ Corporation was void since
the revenue officers who conducted its audit investigation and recommended
the issuance of the assessment were not named in the Letter of Authority.
The BIR appealed the nullification of the assessment arguing that the
authority of the revenue officers who conducted the audit investigation of
XYZ Corporation was never raised by XYZ corporation during trial nor in its
pleadings filed with the CTA.

1. Did the CTA err in nullifying the assessment?

2. Will the taxpayer be estopped from questioning the authority of
revenue officers who conducted a tax audit if the taxpayer actively
participated in the audit?

SUGGESTED ANSWER:

1. No. The CTA has the power to decide issues not even raised by the
parties in their respective pleadings or memoranda, especially if the
issue concerns the authority of the revenue officers to conduct
audit/investigation of a taxpayer's books of accounts and other
accounting records. (CIR vs. Geniographics Inc., CTA EB No. 2357
promulgated on August 8, 2022). The authority of revenue officers who
conduct a tax audit is vital in the tax assessment process. Under the
rules, only those named in the Letter of Authority are authorized to
conduct the audit. It guarantees that tax agents will act only within
15
 the authority given to them in examining a taxpayer.

2. No. The authority of revenue officers who conduct a tax audit is vital
in the tax assessment process. The tax assessment cannot be
considered valid just because the taxpayer actively participated in the
tax audit conducted by revenue officers who were not authorized to
examine the taxpayer's accounts. Estoppel cannot be applied in this
case to ratify the validity of the assessments made. Considering that
the due process requirements were not shown to have been fulfilled by
the BIR, the assessment is null and void. (Commissioner of Internal
Revenue v. BASF Philippines, Inc. (CTA En Banc Case No. 2323 (CTA
Case No. 9747), August 2, 2021),

PROBLEM NO. 13: In 2014, Shang Property Developers, Inc. (Shang)

received a Letter of Authority authorizing Revenue Officer (RO) Ami and
Group Supervisor (GS) Causapin of RDO 47, authorizing them to audit and
examine Shang’s books of accounts and other accounting records for the
taxable year 2013.

In 2016, Shang executed a waiver to extend the prescriptive period to assess

and request for more time to submit documents necessary for the audit. In
2016, a Letter was issued by the Revenue District Officer of RDO 47
informing Shang that the audit would be assigned to RO Ventura and GS
Bello. Attached in the said Letter is a Memorandum of Assignment (MOA).

Thereafter, RO Ventura and GS Bello recommended the issuance of PAN.

Shang protested to the PAN. Subsequently, a FAN, a Preliminary Collection
Letter and a Final Notice Before Seizure were issued. Finally, a WDL seeking
the collection of the amount provided in the FAN was issued.

Then, Shang filed the instant Petition with a Motion to Suspend Collection of
Taxes.

2) Does the CTA have jurisdiction over the case?

3) Was the assessment valid?

SUGGESTED ANSWER:

1) Yes.

Section 7(1) of RA 1125 provides that the CTA shall exercise exclusive
appellate jurisdiction to review by appeal decisions of the CIR in cases
involving disputed assessments, refunds of internal revenue taxes, fees
or other chargers, penalties imposed in relation thereto, or other
matters arising under the NIRC, or other laws or part of law
administered by the BIR.

Here, Shang is appealing the issuance of the WDLs, which is a

manifestation of the CIR’s effort to collect the subject deficiency tax
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assessments. The issuance of the WDLs are not decisions of the CIR
directly to assessments, considering that these are usually issued post-
assessment. Although not directly related to assessments, the CTA still
has jurisdiction to determine the propriety of the issuance of such
WDLs. This is because the issuance of such qualifies as a decision by
the CIR relating to other matters arising from the implementation of the
NIRC (i.e., collection of taxes) that may be appealed before the CTA as
provided under Section 7(1) of RA 1125.

Also, while Shang is mainly appealing the CIR’s efforts to collect the
subject deficiency taxes, this does not mean that the CTA is limited in
determining whether the collection procedure employed after
assessment is proper. The CTA may also rule upon the validity of the
assessment. After all, a void assessment bears no fruit. As such, no tax
collection can be pursued from such a void assessment.

2) No.

A LOA as an instrument of due process should particularly name the

revenue officers who are authorized to conduct an audit. A MOA simply
notifies a taxpayer of the transfer of audit/investigation to another set
of revenue officers. Unlike a LOA, a MOA does not show that the new
set of revenue officers who will pursue the audit are properly authorized
to do so.

Here, RO Ventura and GS Bello were able to audit, examine and inspect
Shang’s books of accounts and other accounting records (which then
led to deficiency tax assessments against respondent) through a mere
MOA, despite the clear requirement that all revenue officers conducting
an audit/investigation of a taxpayer should be properly authorized with
an LOA.

While it can be argued that a LOA does not partake a particular form,
any document may qualify as a LOA provided that the essential
requisites of a LOA are present. To be effective, a LOA must be issued
by any of the following:

1) CIR himself or his duly authorized representative;

2) Revenue Regional Director;
3) Regional Directors;
4) Deputy Commissioners;
5) Commissioner; and
6) Other officials that may be authorized by the Commissioner
for the exigencies of service.

Here, the Letter and MOA in 2016 were issued by a mere Revenue
District Officer. Hence, the subject MOA cannot qualify as a valid LOA.

Hence, due to the absence of a LOA authorizing RO Ventura and GS

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 Bello to examine Shang, the deficiency tax assessment issued against
Shang are void. Accordingly, no tax collection can be pursued based
on these assessments. It is noteworthy that assessments issued
without the requisite LOA are inescapably void.

PROBLEM NO. 14: Difference between a Preliminary Assessment Notice

(PAN) AND a Formal Assessment Notice (FAN).

SUGGESTED ANSWER: A PAN merely informs the taxpayer of the initial

findings of the Bureau of Internal Revenue. It contains the proposed
assessment, and the facts, law, rules, and regulations or jurisprudence on
which the proposed assessment is based. It does not contain a demand for
payment but usually requires the taxpayer to reply within 15 days from
receipt. Otherwise, the Commissioner of Internal Revenue will finalize an
assessment and issue a FAN.

The PAN is a part of due process. It gives both the taxpayer and the
Commissioner of Internal Revenue the opportunity to settle the case at the
earliest possible time without the need for the issuance of a FAN.

On the other hand, a FAN contains not only a computation of tax liabilities
but also a demand for payment within a prescribed period. As soon as it is
served, an obligation arises on the part of the taxpayer concerned to pay the
amount assessed and demanded. It also signals the time when penalties and
interests begin to accrue against the taxpayer. Thus, the NIRC imposes a
25% penalty, in addition to the tax due, in case the taxpayer fails to pay the
deficiency tax within the time prescribed for its payment in the notice of
assessment.

Likewise, an interest of 20% per annum, or such higher rate as may be

prescribed by rules and regulations, is to be collected from the date
prescribed for payment until the amount is fully paid. Failure to file an
administrative protest within 30 days from receipt of the FAN will render the
assessment final, executory, and demandable. (See Commissioner of Internal
Revenue v. Transitions Optical Philippines, Inc., G.R. No. 227544, November
22, 2017)

PROBLEM NO. 15: Are the requirements of due process satisfied if only
the Formal Assessment Notice (FAN) stating the computation of tax
liabilities and a demand to pay within the prescribed period was sent by
the BIR to the taxpayer?

SUGGESTED ANSWER: The Supreme Court had already settled in the case
of CIR vs. Metro Star Superama, Inc. (GR No. 185371) the issue on the effect
of failure to strictly comply with the notice requirements prescribed under
Section 228 of the NIRC.

The Court ruled that sending a Preliminary Assessment Notice (PAN) to a

taxpayer to inform them of the assessment made is but part of the due
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process requirement in issuing a deficiency tax assessment, the absence of
which renders nugatory any assessment made by the tax authorities.

The taxpayers must be informed in writing of the law and the facts on which
the assessment is made; otherwise, the assessment shall be void.

Section 228 of the Tax Code clearly requires that the taxpayer must first be
informed that he is liable for deficiency taxes through the sending of a PAN.
He must be informed of the facts and the law upon which the assessment is
made. The law imposes a substantive, not merely a formal, requirement.

Within fifteen (15) days from receipt of the PAN, the taxpayer shall be
required to respond to said notice. If the taxpayer fails to respond within
said period, the Commissioner or his duly authorized representative shall
issue a FAN based on his findings.

Such FAN may be protested administratively by filing a request for

reconsideration or reinvestigation within thirty (30) days from receipt of the
FAN. In case of a request for reinvestigation, the taxpayer has additional
sixty (60) days from filing of the protest to submit all relevant supporting
documents. Otherwise, the assessment shall become final.

However, pursuant to Section 228 of the Tax Code, as amended, a PAN shall
not be required in any of the following cases:

1. When the finding for any deficiency tax is the result of a mathematical
error in computing the tax appearing on the face of the tax return filed
by taxpayer;
2. When a discrepancy has been determined between the tax withheld
and the amount actually remitted by the withholding agent;
3. When the taxpayer who opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period was determined to have
carried over and automatically applied the same amount claimed
against the estimated tax liabilities for the taxable quarter or quarters
of the succeeding taxable year;
4. When the excise tax due on excisable articles has not been paid; or
5. When an article locally purchased or imported by an exempt person,
such as, but not limited to, vehicles, capital equipment, machinery,
and spare parts, has been sold, traded, or transferred to non-exempt
persons.

This is confirmed under the provisions R.R. No. 12-99, as amended, of the
BIR which, as an exception, the notice for informal conference and the
preliminary assessment notice shall not be required in any of the above
cases. In such cases, the issuance of the formal assessment notice for the
payment of the taxpayer's deficiency tax liability shall be sufficient.

PROBLEM NO. 16: RCBC received a FLD/FAN from the BIR and on July
20, 2001, RCBC filed a protest letter/request for reinvestigation.
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RCBC submitted relevant documents supporting its protest on
September 18, 2001 (60th day from July 20, 2021). Under the rules,
the Commissioner had until March 17, 2002 (or 180 days from
September 18, 2001) to issue his decision.

On April 30, 2002, RCBC filed a petition for review with the CTA. CTA
dismissed the Petition for having been filed out of time.

Can RCBC wait for the decision of the CIR on the protest and file
another appeal to CTA?

SUGGESTED ANSWER: No. The remedies of elevating the disputed

assessment to CTA (after the 180-day inaction) or awaiting for the decision
of the CIR are mutually exclusive.

Based on the foregoing, petitioner cannot now claim that the disputed
assessment is not yet final as it remained unacted upon by the
Commissioner; that it can still await the final decision of the Commissioner
and thereafter appeal the same to the Court of Tax Appeals.

After availing the first option, i.e., filing a petition for review which was
however filed out of time, petitioner cannot successfully resort to the second
option, i.e., awaiting the final decision of the Commissioner and appealing
the same to the Court of Tax Appeals, on the pretext that there is yet no
final decision on the disputed assessment because of the Commissioner’s
inaction. (See Rizal Commercial Banking Corp. vs. CIR, Supreme Court, G.R.
No. 168498, April 24, 2007)

PROBLEM NO. 17: Does the Court of Tax Appeals have the jurisdiction
to declare a tax law constitutional or invalid? Explain.

SUGGESTED ANSWER: In the case of British American Tobacco v.

Camacho, G.R. No. 163583 (2008), the Supreme Court ruled that the CTA’s
jurisdiction to resolve tax disputes in general, does not include cases where
the constitutionality of a law or rule is challenged.

However, in the case of City of Manila vs Judge Cuerdo, City of Manila vs

Judge Cuerdo, G.R. No. 175723 (2014), The Supreme Court en banc
recognized that the CTA possessed all such implied, inherent and incidental
powers necessary to the full and effective exercise of its appellate
jurisdiction over tax cases.

In the Banco de Oro vs Republic, G.R. No. 198756 (2016), the Supreme
Court en banc pronounced in no uncertain terms that the CTA had
jurisdiction to rule on the constitutionality or validity of a tax law or
regulations or administrative issuance, whether raised by the taxpayer
directly or as a defense. In other words, within the judicial system, the law
intends the CTA to have exclusive jurisdiction to resolve all tax problems.
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Petitions for writs of certiorari against the acts and omissions of the said
quasi-judicial agencies should, thus, be filed before the CTA.

The grant of appellate jurisdiction to the CTA included such power

necessary to exercise it effectively.

PROBLEM NO. 18: Is an injunctive relief available as a remedy to assail

the collection of a tax?

SUGGESTED ANSWER: Taxes are the lifeblood of the government and

should, as an inflexible policy, be collected promptly and without hindrance
or delay (see Commissioner of Internal Revenue v. Standard Insurance Co.,
G.R. No. 219340) in order not to disrupt the operations of the government.

To further bolster this principle, Section 218 of the Tax Code, as amended,
provides a non-interference policy with respect to collection of taxes by
stating that "no court shall have the authority to grant an injunction to
restrain the collection of any national internal revenue tax, fee or charge
imposed by the Tax Code.” Courts have cited this provision as basis for
refusing injunctive relief when no grounds for such relief were shown.

Corollary to this, Section 11 of Republic Act (RA) No. 1125, as amended by

R.A. No. 9282, embodies the rule that an appeal to the Court of Tax Appeals
(CTA) from the decision of the Commissioner of Internal Revenue (CIR) will
not suspend the payment, levy, distraint, and/or sale of any property of the
taxpayer for the satisfaction of the taxpayer’s tax liability. Thus, a general
rule, injunctive relief is not available as a remedy to assail the collection of a
tax.

As an exception to the “no injunction rule”, Section 11 of RA No. 1125, as

amended, provides and empowers the CTA to suspend the collection of a tax
if based on its opinion, the collection thereof may jeopardize the interest of
the government and/or the taxpayer.

If there are grounds to suspend the collection, the CTA may, at any stage of
the proceeding, suspend the collection and require the taxpayer to either
deposit the amount claimed, or file a surety bond for not more than double
the amount.

Procedurally, therefore, it is imperative for the CTA to conduct a preliminary

hearing and receive evidence not only to ascertain whether there are
grounds to suspend the collection of a deficiency assessment, but also to
determine, pendente lite, whether the requirement of providing the required
security could be reduced or totally dispensed with.

The bond requirement, as a condition precedent to the suspension of the

collection, presupposes that the processes by which the collection sought to
be made by means thereof are carried out in accordance with the law (See
Collector of Internal Revenue v. Reyes and CTA, G.R. No. L-8685).
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Consequently, what is suspended is the act of collecting.

Conversely, the bond requirement should not apply when the processes are
in plain (and obviously in) violation of the law that they have to be
suspended for jeopardizing the interests of taxpayer.

Thus, illegal (or erroneous) assessment or collection or levy of taxes

resulting to substantial injury or violation of substantive (or procedural)
rights are grounds for equitable interference.

These are questions of facts that calls for the reception of evidence beyond
mere allegations. It requires the CTA to properly determine the existence of
such grounds (see Spouses Pacquiao v. CTA and CIR, G.R. No. 213394).
Absent of any abuse or improvident exercise of authority, these findings of
facts shall not be disturbed on appeal by the Supreme Court. (See Sea-Land
Service, Inc. v. Court of Appeals, G.R. No. 122605; Reyes v. CIR, G.R. Nos. L-
24020-21; Paseo Realty & Development Corp. v. Court of Appeals, G.R. No.
1199286)

If after preliminary determination, it was found that that prescription has

set in or, the assessment and collection processes employed by the CIR in
exacting their tax liabilities are not sanctioned by law or were in patent
violation of their constitutional right to due process, the CTA has the clear
authority not only to suspend the collection of the tax, but also to dispense
with the requirement of depositing a cash or filing of a surety bond.
(Collector of Internal Revenue v. Avelino, G.R. No. L-9202; Collector of
Internal Revenue v. Reyes and CTA, G.R. No. L-8685; Collector of Internal
Revenue v. Zulueta, G.R. No. L-8840). What is actually being suspended is
the use of illegal methods or means to effect collection of the alleged
deficiency taxes. To require a bond under these situations would be illogical
and improper.

According to the Supreme Court, the purpose of the above rule is not only to
prevent jeopardizing the interest of the taxpayer, but more importantly, to
prevent the absurd situation wherein the courts would declare "that the
collection by the summary methods of distraint and levy was violative of law,
and then, in the same breath require the taxpayer to deposit or file a bond
as a prerequisite for the issuance of a writ of injunction."

PROBLEM NO. 19: What is a jeopardy assessment?

SUGGESTED ANSWER:

A jeopardy assessment is a tax assessment made by an authorized Revenue

Officer (RO) without the benefit of complete or partial audit. The assessment
is done because of a belief that the determination and collection of a
deficiency tax will be jeopardized by delay caused by the taxpayer’s failure
to: (a) comply with audit and investigation requirements to present his
books of accounts and/or pertinent records; (b) substantiate all or any of
22
the deductions, exemptions or credits claimed in his return. A jeopardy
assessment is valid.

PROBLEM NO. 20: What is a tax deficiency? What is a tax delinquency?

SUGGESTED ANSWER:

A tax deficiency pertains to the amount of tax short of the full tax due that
should be paid to the government.

A tax delinquency arises upon the failure of the taxpayer to pay the tax due
as demanded by the CIR in a formal letter of demand issued after an
assessment and audit. It is only upon such failure that a taxpayer is
considered delinquent, and thus, should be liable for delinquency interest.

--God Bless--

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